Continuous Commodity Index vs The Market

As Mark Twain said, History doesn't repeat, but it rhythms. Large Technical patterns occur over and over again over hundreds of years of charting because human nature doesn't change. However if you have the book  "Technical Analysis of Stock Trends" by Edwards and McGee, considered to be the bible of T.A., it's interesting to see how things have changed by looking at the old chart patterns from decades ago as this is an old book.

What you will generally find is that the large patterns caused by unchanging human emotions, still appear, it's just small, short term manipulations by Wall Street are now present most of the time as Wall Street knows how to through off Technical Traders.

Lets take a look at the Continuous Commodity Index, which looked like a Macro version of the market.

 This pattern in the CCI is bigger and across more time, but psychologically is the same pattern as what we see in the market now. Below is the SPY for comparison. The only difference is the CCI collapsed already.

We see the same major events, a market top, some stabilization of the fall from the top and a consolidation in a parallelogram. At the end of the pattern there's a breakout of the pattern-this is Wall Street's game and you won't see it in the much older charts found in the book I mentioned above. From there, a nasty sell-off, which as I have said this week, I believe we are heading for a move to the downside much nastier then I originally thought.

 3C wise, there are similarities as well. First the break from the top at a negative divergence, then a low stabilizes on a relative positive divergence and this large consolidation pattern forms. Between late July and early August, there's a relative positive divergence (as I explained Friday about the SPY 15 min chart, I think this last rally is an accruement of accumulation from the entire pattern and the CCI puts in its biggest rally, which breaks the trendline to the upside (this is the Wall Street head fake that you don't find on older charts, simply because Technical Analysis didn't go mainstream until the late 90's and early 2000 so Wall Street found ways to throw traders off patterns they had been following for decades, even a century or longer). From the false breakout, 3C daily made a lower low on a relative basis and CCI plunged.

All of the same ingredients are here on the SPY chart (which is usually orange, but the original 3C was the yellow version, I only created the other two to deal with intraday trade which the yellow version wasn't very good at, but for those of you using 3C, for daily charts, the yellow version has been the most accurate). We see the same plunge from the market top, a 3C relative positive divergence that stopped the fall and created the consolidation, accrued accumulation through the pattern so there is a positive divergence at the start of this rally and the strongest rally in the price pattern, which also creates a head fake move above resistance in to a relative negative divergence.

The CCI Looks like this currently...

It is now testing resistance, but from the equivalent spot in the SPY right now, it took a nearly -15% fall.  So you get an idea for comparison, the last rally (which was the strongest-like the SPY/Market now) was 7%. The SPY's recent rally is double that at 14%, so if we stick with the relative comparison, that would imply a move of -28% down on the next leg.